Supertrend (ST): How to Read It
Supertrend is a trend-following line plotted above or below price using ATR-based bands. It flips sides when price closes through it, making trend direction easy to see at a glance.
The formula
Common settings: ATR period 10, multiplier 3
How to read it
- Line below price and colored green suggests an uptrend.
- Line above price and colored red suggests a downtrend.
- The line acts as a trailing stop level.
- Higher multipliers give fewer, slower signals.
- Works best in trending markets.
Typical signals
- Price closing above the Supertrend line as a bullish flip.
- Price closing below the Supertrend line as a bearish flip.
- Using the line as a trailing stop in an existing trend.
Pitfalls to avoid
- Whipsaws frequently in sideways markets.
- Lags at major turning points.
- Too tight a multiplier causes constant flipping.
FAQ
What does the multiplier do?
It sets how many ATRs away the line sits; larger values mean fewer signals.
Can Supertrend be used as a stop?
Yes. Many traders trail their stop along the Supertrend line.
Does Supertrend repaint?
Calculated on closed bars it does not change past values, though the current bar's value moves until the bar closes.
Works well with
Average True Range
Average True Range measures how much an asset typically moves in a period, including gaps. It does not show direction, but it is extremely useful for sizing positions and placing stops.
💪Average Directional Index
The Average Directional Index measures how strong a trend is, regardless of its direction. Paired with the +DI and -DI lines, it also helps identify which side is in control.
📉Exponential Moving Average
The Exponential Moving Average is a moving average that gives more weight to recent prices. It responds faster than the SMA, which helps traders spot trend changes sooner.